Profitability lies in marketing

Italian apple growers have managed to stay in business by improving production efficiency. But Kurt Werth, who was for many years a leader with the fruit growing advisory service in the South Tyrol area, believes that future profitability will depend on changes in marketing rather than production techniques.

Over the past 30 years, the average price per kilo received by growers in the South Tyrol, Italy’s main apple-growing region, has dropped from 83 eurocents to 38 eurocents (U.S.$1.00 to $0.49 per pound), adjusted for inflation.

Werth said growers have been able to remain competitive by increasing the efficiency of their orchards and employing new technology in the nurseries, orchards, and packing houses. They’ve planted new varieties, and have installed hail nets to protect against fruit losses. They’ve moved from integrated pest management to integrated fruit production to GlobalGAP. Because of the increased production and yields, the grower’s gross income has remained the same over that period.

However, Werth said it’s unlikely they will be able to make further increases in efficiency and he doesn’t see new varieties as the answer to future profitability.

"It will not change on the production side for sure," he said. "It has to change on the marketing side."

What will be required in the future is a combination of progressive marketing strategies and a consolidation of marketing efforts, he said.

In each country in Europe, 70 to 80 percent of food sales are in the hands of four or five retailers, he said. The South Tyrol area used to have more than 40 small cooperatives each marketing their own fruit. In recent years, the industry has been forming larger marketing entities and Werth predicts that by 2010 there will be two major marketers: VOG (the Association of South Tyrolean Fruit Growers’ Cooperatives) handling 600,000 tons of apples and VIP (Val Venosta Cooperatives Association) with 300,000 tons.

"It’s easier to make more money by organizing the market than to do a better job in the orchard," he said.

Geraldine Warner has been Editor of the Good Fruit Grower since 1992. As well as writing articles for the print magazine and Web site, she manages the editorial team and is responsible for planning and preparing editorial content.